Dipak Kumar Sen, J.
1. In this reference under Section 66(1) of the Indian Income-tax Act, 1922, the following questions have been referred:
'(1) Whether, on the facts and circumstances of this case, the assessee was entitled to full depreciation allowance under Section 10(2)(vi) of the Indian Income-tax Act, 1922, read with Rule 8 of the Rules thereto for the assessment years 1958-59 and 1959-60 ?
(2) Whether, on the facts and in the circumstances of this case, the sum of Rs. 1.65,424 was properly treated as revenue expenditure and allowed accordingly ?'
2. On question No. 1, learned standing counsel appearing on behalf of the assessee did not seriously contest the position that in view of Rule 8 of the Indian Income-tax Rules, 1922, as construed by this court in the case of Anantapur Textiles Lid. v. Commissioner of Income-tax : [1976]102ITR340(Cal) , it could not be disputed that the assessee will not be entitled to full depreciation as claimed. In the premises, the first question is answered in the negative and in favour of the revenue. We make it clear that the assessee will be entitled to depreciation for the relevant period as laid down in the Rules and not for the entire period.
3. So far as the second question is concerned the relevant facts as appearing from the statement of the case and the annexures thereto can briefly be stated as follows :
In the assessment year 1959-60, the previous year ending on the 31st May, 1958, the assessee spent a sum of Rs. 1,65,424 for the construction of dams. In the year in question there was a disaster in the mines. The mines department directed the assessee to carry out protective works for the prevention of recurrence of such disaster and the assessee had to carry out the same.
4. The Income-tax Officer found that the said expenditure was of a capital nature and disallowed the same in the computation of the revenue expenditure.
5. On appeal from the assessment, the Appellate Assistant Commissioner found as follows :
'......there was a serious disaster in the immediately preceding assessment year as a result of which these dams had to be constructed under instructions of the mines department. It was felt that by construction of these dams recurrence of such disaster would be prevented. Therefore, the construction of the dams was done for protection of the mines as also for the safety of the labourers. Protection of the mine which was an asset to the appellant was certainly of a revenue expenditure and it could not be said that the expenditure on protection did bring into existence any new asset to the appellant.'
6. The revenue preferred an appeal to the Tribunal. The Tribunal held as follows ;
'The facts are that there was a serious disaster in the immediately preceding year as a result of which the assessee had to construct dams at a cost of Rs. 1,65,424 in compliance with the direction given by the mines department for prevention of recurrence of such disaster. Evidently, the dams were constructed for the protection of the mines as also for the safety of the labourers. We agree with the A. A. C. that the mines being a capital asset of the company, any expenditure incurred for the protection thereof would be a revenue expenditure'
7. Mr. Suhas Sen, learned counsel on behalf of the revenue, contends that on the facts found in the instant case the expenditure incurred for the purpose of construction of the dams must be held to be of capital nature. He relied on several decisions in support of his contentions. The first decision cited by him was in the case of Avon Beach & Cafe Lid. v. Stewart (H.M. Inspector of Taxes) [1950] 31 TC 487. In that case the assessee ran a cafe on the seashore and had erected a barrier of wooden piles in front of the cafe on the seashore as a protection against erosion by the sea. It was held that the decision of the Commissioners that the expenditure incurred for the erection of the said barrier was of a capital nature was correct.
8. Vaisey J. held that the case was one of a new construction resulting in a new tangible erection or structure which was not there before and the same was constructed to prevent the seashore being eroded by the tides. The learned judge quoted the observation of Lawrence J. in the well-known case of Southern v. Borax Consolidated Co. Ltd. [1940] 23 TC 597; [1942] 10 ITR (Supp) 1 as follows :
'On the other question as to whether this is a payment properly attributable to capital or to revenue, in my opinion the principle which is to be deduced from the cases is that where a sum of money is laid out for the acquisition or the improvement of a fixed capital asset it is attributable to capital, but that if no alteration is made in the fixed capital asset by the payment, then it is properly attributable to revenue, being in substance a matter of maintenance, the maintenance of the capital structure or the capital assets of the company.'
9. Mr. Sen next cited the decision in the case of Phillips (H. M. Inspector of Taxes) v. Wheildon Sanitary Potteries Ltd. [1952] 33 TC 213. Here, the assessee manufactured pottery at a factory situate by the side of a canal. The factory was separated from the canal by an embankment. The embankment had subsided and resulted in seepage of water in the factory. A new barrier was built on the site. The Commissioner held that the expenditure incurred in erecting the new barrier was allowable as a deduction. Having regard to the existing factory the court did not hold that the construction of the new barrier was a repair and allowable as a deduction. On taking into account the expenditure, the permanent nature of the new barrier, enduring advantage conferred thereby upon the business and also in view of the contention of the assessee that it was essential to enable the business to be carried on, the court held that the expenditure was of a capital nature.
10. Mr. Sen also cited the case of William P. Lawrie v. Commissioners of Inland Revenue [1952] 34 TC 20. The facts of this case are different from the facts before us and, in any event, no new principles are laid down.
11. Lastly, Mr. Sen cited the decision of the Supreme Court in the case of Sitalpur Sugar Works Ltd. v. Commissioner of Income-tax : [1963]49ITR160(SC) . In this case the expenditure was incurred in dismantling and refitting an existing plant at a more convenient site. The Supreme Court held that such expenditure was capital expenditure in the same way as expenditure which would have been incurred for acquiring an additional plant. The Supreme Court observed that there was no reason for making a distinction between an expenditure incurred for acquiring a material capital asset and an expenditure incurred for acquiring other advantages of an enduring nature for the benefit of trade.
12. Learned standing counsel, on behalf of the assessee, contends on the other hand, that in the instant case, the construction in question could not be stated to be an accretion to the existing capital asset. The existing mine could be operated even in the absence of the dams. The only object of the new construction was to avert an apprehended disaster and the same was carried out at the instance of the authorities. It had no direct connection with the carrying on of the business by the assessee. In the premises it was submitted that the said expenditure should be held to be a revenue expenditure. In support of such contention several decisions were cited. The first was the case of Southern (H.M. Inspector of Taxes) v. Borax Consolidated Ltd. [1942] 10 ITR (Supp) 1 . This decision has already been referred to earlier. The proposition of law laid down in this case was as follows :
'On the other question as to whether this is a payment properly attributable to capital or to revenue, in my opinion the principle which is to be deduced from the cases is that where a sum of money is laid out for the acquisition or the improvement of a fixed capital asset it is attributable to capital, but that if no alteration is made in the fixed capital asset by the payment, then it is properly attributable to revenue, being in substance a matter of maintenance, the maintenance of the capital structure or the capital assets of the company.'
13. It was contended that the expenditure in the instant case was really in the nature of the maintenance of the existing capital asset.
14. The next decision cited was of the Supreme Court in the case of Commissioner of Income-tax v. Kirkend Coal Co. : [1970]77ITR530(SC) . Here, the question arose whether the amounts spent by the assessee carrying on the business of coal mining for stowing operation was allowable as business expenditure. It was found as a fact that stowing was an operation carried out in the process of extraction of coal and unless the same was carried out the extraction of coal was not possible irrespective of whether depillaring had been done or not. It was held that the expenditure incurred for stowing operations was a revenue expenditure.
15. A decision of this court in the case of Kalyanji Mavji & Co. v. Commissioner of Income-tax : [1973]87ITR228(Cal) was also cited. The facts in this case were that a colliery owned by the assessee was in the occupation of the military authorities for about 13 years and could not be worked during that period. After the colliery was derequisitioned the assessee incurred substantial expenditure in renovating the buildings, repairing the machinery and clearing the land of debris for the purpose of resumption of mining operations in the said colliery.
16. The entire amount so spent was claimed to be business expenditure. Up to the Tribunal it was held that the said expenses were in the nature of capital expenditure.
17. The court held that on the facts found no new or fresh asset had been acquired by the assessee as a result of such expenditure. The aim and object of this expenditure was only to carry on the operation of the existing concern of the assessee for facility of trade and was aimed at removing the impediments thereto. It was held that such expenditure was a part of the working expenses of the assessee and was laid out for the purpose of profit-earning and was revenue expenditure.
18. It is not easy in all cases to draw a dividing line between a capital expenditure and a revenue expenditure. The propositions of law no doubt are fairly well-settled but the difficulty arises in applying such propositions to an existing set of facts and circumstances. In the instant case from the facts found it appears to us that the following facts have been established: (a) there was new construction, viz., that of the dams; (b) the purpose of such construction was to prevent the recurrence of a disaster which had occurred earlier; (e) and the ultimate object was the protection of the mines as also the safety of the labourers.
19. It appears to us that the authorities below have confined their attention only to the protective aspect of the construction. To rely entirely on one aspect without taking into consideration the other relevant aspects cannot be the proper approach. The new constructions, it cannot be disputed, resulted in the benefit of the mine. The mine after such construction was free from the apprehended danger. The danger apprehended was not illusory as it had occurred at least once earlier. The benefit conferred cannot also be stated to be temporary or for any particular year as the object of the construction was prevention of recurrence of such disaster in future. Therefore, if this was the object, there was an enduring benefit to the existing asset of the business as a result of such new construction.
20. Looking at the entire facts and circumstances from the point of view as indicated above, we are of the opinion that the expenses incurred in the instant case for the construction of the dams was in the nature of capital expenditure and not revenue expenditure.
21. Accordingly, we answer the question referred at the instance of the revenue in the negative and in favour of the revenue.
22. Each party will pay and bear its own costs.
Deb, J.
23. I agree.